| Item 1.01. | Entry into a Material Definitive Agreement. |
Share Purchase Agreement
On January 10, 2019, Flotek Industries, Inc. (the “Company”) entered into a Share Purchase Agreement (the “Purchase Agreement”) with Archer-Daniels-Midland Company (“ADM”) for the sale (the “Divestiture”) of all of the shares representing membership interests in its wholly owned subsidiary, Florida Chemical Company, LLC (“FCC”), for total consideration of $175 million in cash, subject to post-closing working capital and other adjustments.
The Purchase Agreement contains customary representations, warranties and covenants for a transaction of this type. The Purchase Agreement also contains certain covenants with respect to the period of time between the execution date and the closing of the Divestiture.
Consummation of the Divestiture is subject to satisfaction or waiver of various conditions, including, among others (1) the accuracy of the representations and warranties of the parties as of the closing date, (2) the performance of various covenants and agreements of the parties through the closing date and (3) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Divestiture is expected to close in the first quarter of 2019.
The Purchase Agreement contains certain termination rights for the Company and ADM, including, among others, if (i) the closing has not occurred on or prior to March 31, 2019 through no fault of the terminating party; and (ii) certain of the conditions to closing specified in the Purchase Agreement are not satisfied by the closing date through no fault of the terminating party.
ADM has generally agreed to indemnify the Company for breaches of its representations, warranties and covenants contained in the Purchase Agreement, and the Company has generally agreed to indemnify ADM for breaches of its representations, warranties and covenants contained in the Purchase Agreement, each of which is subject to certain survival period limitations, claim thresholds, caps and deductibles.
The Purchase Agreement is filed as Exhibit 2.1 to this Current Report on Form8-K, and the foregoing description of the Purchase Agreement is qualified in its entirety by reference to such exhibit.
Terpene Supply Agreement
Pursuant to the terms of the Purchase Agreement, upon closing of the Divestiture, Flotek Chemistry, LLC, a wholly owned subsidiary of the Company (“Flotek Chemistry”), and FCC will enter into a Supply Agreement (the “Terpene Supply Agreement”), pursuant to which FCC will supply terpene to Flotek Chemistry at specified prices for specified quantities.
The Terpene Supply Agreement will begin on the closing date of the Divestiture and expire on December 31, 2023, subject to early termination in the event of a material breach (subject to athirty-day cure period) or a bankruptcy event by a party. Flotek Chemistry may elect to extend the term of the Terpene Supply Agreement for an additional year by giving written notice to FCC on or prior to September 30, 2023.
Citrus Burst Supply Agreement
Pursuant to the terms of the Purchase Agreement, upon closing of the Divestiture, Flotek Chemistry and FCC will enter into a Supply Agreement (the “Citrus Burst Supply Agreement”, and together with the Terpene Supply Agreement, the “Supply Agreements”), pursuant to which Flotek Chemistry will supply citrus burst to FCC at specified prices for specified quantities.
The Citrus Burst Supply Agreement will begin on the closing date of the Divestiture and expire on December 31, 2023, subject to early termination by a party in the event of a material breach (subject to athirty-day cure period) or a bankruptcy event by the other party. FCC may elect to extend the term of the Citrus Burst Supply Agreement for an additional year by giving written notice to Flotek Chemistry on or prior to September 30, 2023.
